Friday, January 15, 2016

And Now, Gillian Tett With The Shipping News

A huge tell on the state of the real world.
From the Financial Times, Jan. 14:

Shipping’s globalisation woes

For signs of how tectonic plates of the global economy are shifting, look at the Baltic Dry Index
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This week, the eyes of investors have been fixed on tumbling oil prices. Little wonder: with oil now costing as little as $30 a barrel, 15 per cent down since the start of the year, energy markets are signalling trouble ahead — particularly given the continuing turmoil in China.
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For another sign of how the tectonic plates are shifting in the global economy, try looking at the Baltic Dry Index, which measures the cost of shipping raw materials such as coal, metal and fertilisers across the globe.
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Normally, this does not attract much public attention; after all, in an era where investors are obsessed with capital flows — or the latest digital gadgets — it seems rather retro to focus on the humdrum details of harbours and containers.
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But right now, the behaviour of that Baltic index is almost as dramatic as those oil prices. This week, the index fell below 400 for the first time since records began in 1985, after several weeks of steady declines. Last summer the index was well above 1,000, in 2010 it was around 4,000. So if you are gripped by a desire to dispatch a cargo of coal, cement or oil across the seas, it will currently cost you less than it has for at least 30 years.
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Now, it would be nice to think that this is just another sign of our modern technological revolution. But the key reason why shipping prices are falling so fast is that the patterns of modern trade and global growth are not behaving in 2016 as western and emerging market financiers might have expected, or as they did during earlier booms....MORE

One possible fly-in-the-ointment, it appears half the dry bulk carriers are going to go broke before construction is completed later this year. The container companies are doing a little better but even they are mothballing ships.